IN THE MATTER OF GENERAL RULES AND REGULATIONS WITH RESPECT TO THE CONSERVATION OF OIL AND GAS IN THE STATE OF COLORADO, AND RULES OF PRACTICE AND PROCEDURE PERTAINING THERETO AND IN PARTICULAR WITH REFERENCE TO RULE 323

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE CODELL-NIOBRARA SPACED AREA, WELD COUNTY, COLORADO

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CAUSE NO. 407

ORDER NO. 407-64

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on April 16, 1991, in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified application of Eddy Oil Company to allow the 80-acre drilling and spacing unit consisting of the W1/2 SE1/4 of Section 23, Township 4 North, Range 67 West, 6th P.M. to be segregated into two 40-acre drilling and spacing units consisting of the SW1/4 SE1/4 and the NW1/4 SE1/4 of said Section 23 for production from the Codell and Niobrara formations.

FINDINGS

The Commission finds as follows:

1. Eddy Oil Company, as applicant herein, is an interested party in the subject matter of the above-entitled hearing.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On December 19, 1983 the Commission authorized Order No. 407-1 to be issued which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell formation. The units consist of the E1/2 and W1/2 or the N1/2 and S1/2 of each governmental quarter-quarter section with a tolerance of 200 feet and the option to drill an additional well in the undrilled 40-acre tract. Subsequent Order No. 407-10 included the Niobrara formation and allowed downhole commingling of production from the Codell and Niobrara formations. The SE1/4 of Section 23, Township 4 North, Range 67 West, 6th P.M., Weld County, Colorado lies within the area spaced by these orders.

5. No wells have been drilled in the SE1/4 of said Section 23 to establish production from the Niobrara or Codell formations.

6. Based on the facts stated in the verified application and having been heard by the Hearing Officer who recommended approval of the application, and having received no protests, the Commission should approve the request and amend Order Nos. 407-1 and 407-10 and establish two 40-acre units consisting of the SW1/4 SE1/4 and NW1/4 SE1/4 of said Section 23 for the commingled production of oil, gas and associated hydrocarbons from the Niobrara and Codell formations.

7. At the time of administrative hearing the parties agreed to be bound by the verbal order of the Commission in this matter.

ORDER

NOW, THEREFORE, IT IS ORDERED, that, the unit consisting of the W1/2 of the SE1/4 of Section 23, Township 4 North, Range 67 West, 6th P.M., Weld County, Colorado be segregated into two 40-acre drilling and spacing units consisting of the NW1/4 SE1/4 and the SW1/4 SE1/4 for the commingled production of oil, gas and associated hydrocarbons from the Codell and Niobrara formations underlying these lands.

IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

IT IS FURTHER ORDERED, that with the verbal consent of the interested parties at the time of hearing, this order shall become effective forthwith.

ENTERED this 3rd day of May, 1991 as of April 16, 1991.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Patricia C. Beaver, Secretary

Dated at Suite 380

1580 Logan Street

Denver, Colorado 80203

May 1, 1991